Bacon continues to fly off the shelves, but the growth
has been stunted recently by outside pressures.

Elizabeth Fuhrman, The National Provisioner

September 20, 2019

The multi-year rise in bacon looks to be softening
relative to the last five years, and much of that decline can be traced to the
outbreak of African swine fever in China. The outbreak is driving a lot of
pricing action in the recent quarter affecting pork prices in particular, says
David Thompson, principal at IRI, Chicago.

“We saw last year there were some pricing actions, but
the volumes were staying flat and the velocities were staying stable,” he says.
“I’m seeing some softest in the velocity in the recent weeks.”

While bacon’s landscape is changing in the near term,
bacon is still up 3.8 percent in volume and 1.4 percent in dollars for the year
ending June 16 in total U.S. multi-outlets, IRI reports. Comparing the full
year to this time last year, bacon also is still outpacing the refrigerated
meats category, Thompson says. But in the most recent quarter, the bacon
category has started to soften with the dramatic acceleration in pricing. For
example, for the 13 weeks ending June 16, the price per volume per pound is up
3 percent from last year, IRI reports. In the month ending June 16, the price
per volume per pound is up 8.6 percent.

“There’s been a big jump from a pricing perspective, and
it’s having a negative impact on the velocity,” Thompson says. “The velocity in
the most recent month is actually down 8.5 percent. Bacon still has very high
penetration and the trips are up from last year. Consumers still are very
interested in bacon, but now it’s facing some pricing challenges that are
likely going to stick for the short term.”

Bacon continues to be a growth engine even in the current
market where health is a driving factor, says Meagan Nelson, associate director
at The Nielsen Co., in Chicago.

Nielsen tracks bacon is up 3.7 percent in dollars and 4.6
percent in units for the 52 weeks ending July 6. With African swine fever in
China, however, Nielsen also sees moderation in the latest four weeks ending
July 6 as prices have taken a sharp turn up. In the latest four weeks, dollars
are up 9.8 percent as units flatten out to only 0.3 percent as average unit
prices increased 9.5 percent from this time last year, Nielsen reports.

Bacon is a highly promoted product, so IRI’s Thompson
expects the price increases will be mitigated by increased promotion in the
category.

“In general, almost all of the bacon processors are very
tentative right now on pricing,” says Chris DuBois, IRI’s senior vice
president. “They know they have a great product. They know they’ve got
something that people love, so pricing isn’t something that is taken easily.
What we are overseeing are incremental moves as a way of trying to cover cost,
recover risk and in this kind of competitive market, I wouldn’t expect to see
crazy, huge price increases. I would expect to see incremental wait and see. So
every three to six months you can begin to see small actions over time.”

While the 16-ounce bacon package is the sweet spot in the
category, DuBois also expects that manufacturers will look to promote smaller
pack sizes, such as 12-ounce, as a way for consumers to spend the same dollar
amount, but receive a little less product.